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Trading ETF's on Commodities

Updated on February 13, 2008

ETF's can be traded in lieu of commodities

Commodities are incredibly leveraged instruments that can produce nice gains as well as large losses. They are a good trading vehicles for some investers/traders but not for others.

Let's consider trading an ETF instead of a commodity.

An ETF is an electronically traded fund. You probably already knew that. Did you know that there are ETF's that track or are associated with companies that are involved in a particular commodity?

Following are some of the Power shares which have ETF's that track commodities:

DBA-Agricultural fund

DBB-Base metal fund

DBE-Energy fund

DBO-Oil fund

DBP-Precious metals fund

DBS-Silver fund

DGL-Gold fund

If you don't want to trade an ETF that tracks a commodity, you can trade an ETF on companies that are involved with a commodity: These ETF's are a collection of stocks that produce or are in some way connected with the particular commodity.

Here are a few ETF's.

IYE-I shares Energy

XLB-Material SPDR

XLE-Energy Select SPDR

OIH-Oil service HLDR

There are many trading options on stocks, but ETFs allow a person to steer from single events that move an equity. They are also traded just like a stock would be traded in your brokerage account. ETF's are also less volatile than stocks. They allow a person to steer their trades/investments away from unpredictable events like earnings.

Do you like options? Well there are plenty of contracts available on ETF's.

Do your own research and find out what is best for your own portfolio or trade. ETF's are another vehicle which you can explore.

ETFs can be viewed on the following site. It is free and is a good source of information on both options and ETF's.

ETFs aren't just the Q's ,DIA's, and the SPY.

Always read the prospectus before you invest.

Note: I have no afiliation with CBOE. I am not currently long or short any of the aforementioned ETF's. You are responsible for your own investments. This post is for educational and entertainment purposes only. ETF's and options underlying can be a risky investment so know your risk before you invest.


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